July 12, 2011
European leaders bowed to the inevitable and conceded that Greece is likely to default on its massive debt burden, which would be a first among the 17 countries using the euro.
They also abruptly shifted tack in the eurozone debt crisis by raising the possibility of using the eurozone's bailout fund to buy back Greek debt on the markets, meaning sizeable losses for Greece's private investors and reduced debt levels for Athens.
Following 12 hours of fraught negotiations in Brussels haunted by the risks of contagion in the eurozone spreading to Italy, now being targeted by the financial markets for the first time in the 18-month crisis, the 17 governments of the eurozone pointedly failed to rule out a sovereign debt default by Greece.
A statement said that, at the meeting, the European Central Bank "confirmed its position that a credit event or selective default should be avoided". There was no declaration of governments' support for the ECB position. Jean-Claude Juncker of Luxembourg, president of the Eurogroup, and Olli Rehn, EU commissioner for monetary affairs, both declined to offer one.
"That does not mean that the Eurogroup as such would do everything to provoke a credit event," quipped Juncker.
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